GAAR aims to counter tax arrangements that are entered into simply to avoid UK tax. It aims to give HMRC the power to act against tax schemes that are legal but deemed “abusive.”

The draft confirmed that HMRC, not an independent body, will determine which arrangements require action.

Chris Sanger, global head of tax policy at Ernst & Young, said that HMRC’s latest draft is closer to the original proposals rather than to those proposed in June.

Based on the draft legislation, the GAAR should apply only to arrangements that are deemed abusive - for example because they involve ‘contrived or abnormal steps’ to achieve unintended results.

“The draft legislation relies on whether or not HMRC has ‘accepted’ that some action is established practice. This leaves a lot to HMRC’s discretion and to, in the future, publicising what is established practice.”

Stephen Herring, senior tax partner at BDO, praised the government for “refining the definition of the so-called 'double reasonableness test' which now promises to be more focused upon the most abusive schemes rather than a less effective (and economically damaging to the UK) scatter gun approach.”

He argues businesses and sensible commentators are “sure to welcome reconfirmation from HMRC that there is to be a “high threshold for showing that schemes are abusive”, again emphasising that the focus will be firmly on closing down those abusive schemes generally marketed by fringe advisers that clearly have no commercial basis. Those undertaking authentic tax planning focussed upon genuine transactions and commercial alternatives ought to have nothing to fear.”

He did warn that retrospective application of the guidelines would be “unwise.”

The Finance Bill also includes the first publication of legislation regarding the GAAR advisory panel. The panel is designed to safeguard from inappropriate use of the GAAR by HMRC.

Jon Richardson, tax partner at PwC, said he believes the guidance notes have created “more clarity” on the scope of GAAR, but warned that “we're going to need many more examples, particularly showing the boundary between acceptable and unacceptable, and covering transactions that private individuals and private businesses might undertake.

"The GAAR is not intended to affect the way the profits of multinationals are allocated between the UK and other countries. Any review of these transfer pricing rules would involve international tax authorities and other organisations such as the OECD,” he added.

However, Martin Lambert, tax partner at Grant Thornton UK, hoped that the advisory panel would provide “both clarity and fairness to the taxpayer in the application of the GAAR.

“Unfortunately, however, the legislation confirms that the view of the panel will not be binding on HMRC, requiring only that the panel's view is considered.

"The extent to which taxpayers have comfort that the panel's view will be respected therefore remains unclear," added Lambert.